The list of sponsors reads like a Fortune 500 list until last week, when Planned Parenthood took down a list of iconic American corporations its website had claimed as donors. But now, some of those large corporations are saying they don’t sponsor the abortion provider and haven’t in years, if at all.
A common feature of Obama administration economic policies is the use of government coercion. The Obamacare health law mandated that individuals buy insurance. The administration’s tax increases grabbed more earnings from millions of people. And federal agencies are imposing an increasing pile of labor, environmental, and financial regulations on businesses.
Pro-market policy experts point out the negative effects of each intervention, but the administration keeps dreaming up with new ways to take our money, restrict what we do, and manipulate the economy.
Liberals or progressives seem to have no inkling of why free economies work better than economies based on central authority. They favor using centralized force apparently because they think that it creates practical benefits.
But coercion is not a practical way to help the economy—regulations and taxes rarely make us better off. Some people may gain, but the vast majority of people lose. Coercion tends to destroy value, not create it.
There are at least four fundamental reasons why.
“Free markets generate value, deliver diversity, and spur better ways of doing things.”
First, because the government uses coercion, its actions are based on guesswork. Regulations are top-down commands, not efforts at finding common agreement. Spending relies on compulsory taxation, not voluntary customer revenue. So government actions generate no feedback regarding whether or not they generate any net value.
Compare that to markets. We know markets generate value because they are based on voluntary and mutually beneficial exchanges. Decisionmaking in markets is a reality-based system guided by individual preferences.
Consider the purchase of aircraft. In the private sector, an airline chooses the number to buy based on the demand for air travel, which is aggregated through the price system from choices made in the marketplace. By contrast, when the Pentagon buys aircraft, it has no price system or measured demand to guide it, so its decisions are made flying blind.
Second, government actions often destroy value because they create winners and losers. Regulations squelch personal choices and impose one-size-fits-all rules. The amount of federal spending on each program is chosen for the whole nation, and thus differs from the amount that would be favored by each individual.
In markets, people choose the amount of each item they purchase, and they can pursue a vast array of different interests, lifestyles, and careers. “The great advantage of the market,” Milton Friedman said, “is that it permits wide diversity,” while “the characteristic feature of action through political channels is that it tends to require or enforce substantial conformity.”
Liberals like using the word “diversity,” but it is free markets that actually deliver it. With their support of big government, liberals seem to believe that people can be made better off by quashing their individual choices. But with America’s increasingly pluralistic society, it makes more sense to allow for diverse market solutions, rather than top-down rules from Washington.
Third, government activities fail to create value because the funding comes from a compulsory source: taxes. Unlike in markets, bad government decisions are not punished and failed policies are not weeded out because the funding is not contingent on performance. Low-value programs can live on forever, and they block the reallocation of resources to better uses.
In markets, the quest for profits spurs businesses to search for better ways of doing things. Businesses aim to maximize value for themselves, and they end up boosting the broader economy, which is the “invisible hand” of Adam Smith. In government, there is no invisible hand, no guide to steer policymakers in a constructive direction.
Fourth, government programs often fail to generate value because the taxes to support them create “deadweight losses” or economic damage. Taxes are compulsory, and so they induce people to avoid them by changing their working, investing, and consumption activities. That reduces overall output and incomes.
Let’s say that the government imposes a tax on wine. That would transfer money from wine drinkers to the recipients of government programs. But an additional cost—the deadweight loss—would be created as people cut back their wine consumption. People would enjoy less wine and suffer a reduction in welfare or happiness.
The wine tax has blocked mutually beneficial exchanges from taking place, and thus has damaged the economy. The size of the damage depends on the type of tax, but for the income tax, empirical studies show that the deadweight loss of raising taxes by a dollar is roughly 50 cents.
Suppose that a philanthropist spends $10 million on a charitable program that generates $12 million in benefits. That private program would be a success. But a similar program run by the government would be a failure because the tax funding would create deadweight losses. The government program would cost $10 million directly, plus another $5 million in deadweight losses, for a total cost that is higher than the benefits.
In sum, coercion imposes deadweight losses and creates winners and losers, which is the polar opposite of the win-win exchanges in markets. Politicians may hope that their interventions create more winners than losers, but that is wishful thinking because their decisions are based on no more than guesswork.
Liberals might assume that the government has an advantage in tackling society’s problems because it is such a powerful institution. But because it uses coercion to raise funds and impose its will, the government tends to make bad decisions, entrench them, and drag the whole economy down.Chris Edwards s editor of DownsizingGovernment.org at the Cato Institute.
A. Trevor Thrall and Erik Goepner
The polls are in: A majority of Americans supports President Obama’s nuclear deal with Iran. But in what is emerging as a significant new element of the political landscape, the millennial generation (those born between 1980 and 1997) is by far the most supportive, with 65 percent for the deal, compared with 55 percent of older Americans in a recent Cato/YouGov poll.
The millennials’ attitudes toward the deal bolster the findings of our recent study, published by the Cato Institute, of millennials’ foreign policy attitudes. Compared with their elders, millennials view the world as less threatening, are more supportive of international cooperation and diplomacy, and are far more averse to the use of military force. All of these attitudes likely contribute to millennial support for the Iran deal.
Though 9/11 is the defining event of their generation, millennials see the world as a less dangerous place than their elders. Millennials are less worried about almost all potential threats to international security, including international terrorism, Islamic fundamentalism, and the rise of China. This is why, as the Cato/YouGov poll found, just 53 percent of millennials believe that Iran acquiring nuclear weapons would be a “disaster,” compared with 68 percent of older Americans.
“The findings are the bow wave of a sea change ahead in American politics.”
The broad reasons behind their relative ease are twofold. First, millennials grew up after the Cold War, in the absence of a superpower confrontation and the specter of nuclear holocaust. Terrorism is certainly dangerous, but it has not fueled the same level of fear that the Cold War did. Many millennials were simply too young for 9/11 to have had the direct emotional impact it did for older Americans.
In fact, the youngest millennials, born after 1987, are significantly more sanguine about global threats than older millennials, more supportive of the Iran nuclear deal, and less concerned about whether Iran might develop nuclear weapons someday.
Second, the meaning and impact of 9/11 have become entangled with the U.S. response to it. A majority of millennials, as with other generations, views the wars in Afghanistan and Iraq as a mistake, but millennials are also the least likely to believe that using military force is the best way to solve problems. For millennials, 9/11 demonstrates less that the world is a dangerous place than that that aggressive U.S. military action is counterproductive.
And that’s a big reason millennials support the Iran deal: It represents a diplomatic approach to the Mideast that breaks from the military-focused policies of the recent past. When asked whether Congress should allow the nuclear deal to move forward, 58 percent of millennials said it should, compared with 49 percent of older Americans. Millennials are also the only generation in which a majority believes that the plan will either delay or stop Iran from developing nuclear weapons.
Those tempted to argue that these results reflect liberal millennials taking cues from Obama are wrong. Though partisanship is certainly alive and well among millennials, it has much less impact on their attitudes toward the Iran deal than it does on the attitudes of older Americans.
The partisan support gap is just 16 percentage points among millennials, with 75 percent of millennial Democrats and 59 percent of millennial Republicans supporting the deal. But among Gen Xers, born between the 1960s and the early 1980s, the gap between Democrats and Republicans is 53 points; among baby boomers, the gap is 48 points; and among the silent generation (1920s-1940s), the gap is a whopping 72 percentage points. In short, millennials are taking fewer cues than their elders from their political parties.
These findings are the bow wave of a sea change ahead in American politics. The millennial position on Iran is not a blip but an emerging pillar of U.S. public opinion on foreign policy. Millennials’ attitudes toward threats, the utility of military force, the importance of allies, and the role of diplomacy were formed in what sociologists call the “critical period,” the time between the ages of roughly 14 and 24 when historical context and major events shape worldviews and attitudes for a lifetime.
These views are already shaping opinions on a wide range of issues, from the Middle East to climate change and the rise of China. And with millennials now outnumbering baby boomers, we can expect to see their attitudes and opinions playing an increasingly important role in the development and conduct of U.S. foreign policy.A. Trevor Thrall is an adjunct scholar at the Cato Institute and an associate professor at the School of Policy, Government, and International Affairs at George Mason University. Erik Goepner is retired from the Air Force, having commanded units in Iraq and Afghanistan.